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Weakening EU Steel Demand, Russian Trade Bans Shift Global Met Coal Trade



By Hector Forster

January 17, 2023 - A combination of mixed global iron and steel production demand in 2022 with Russian coal trade restrictions and high energy prices contributed to shifting global coal trade, according to analysis by S&P Global Commodity Insights.

Those trends supported EU imports of metallurgical coals from the US, while US coking coal exports grew sharply into India and saw a contraction into China last year.

A key trend was replacing Russian pulverized coal injection grades and other Russian met and steam coals in markets such as Europe and Japan, which decided to ban Russian imports, according to analysis of trade data.

Russian coal trade into the EU dried up as the EU's ban in August took effect, with limited volumes imported into the UK prior the ban and Japan also effecting a total import halt in line with the EU.

Russian PCI and coking coals saw stronger demand in China, and also into India, trading at prices lower than for alternative coals from Australia and North America.

Coals used as PCI typically are weak in coking properties and have high calorific value and are imported as non-coking coals. Some more suitable coking coals have been used increasingly as a PCI, as markets looked to replace Russian supply.

Steel groups were also looking for flexibility around stockpile and trade finance and working capital management to finance replacements to Russian coals.

The EU imported 33.8 million mt of coking coal in the first 10 months of 2022, up 3.4% year on year, while US imports made up 7.4 million mt, down 3.7%.

EU imports of Australian coking coal fell 33% to 7.3 million mt over January-October, while Russian coking coal imports to August fell 27% to 1.89 million mt.

Imports of coking coal from unspecified "countries and territories" totaled 4.2 million mt last year, and recorded as received between Jan-May 2022, up from 1,360 mt imported under the same entry in total in 2021.

PCI Coal

EU imports of 'other coals' from Australia increased 60% year on year to 2.16 million mt over January-October, while US volumes in the same category rose to 1.82 million mt, up 16.5%, and imports from South Africa tripled to 1.42 million mt.

Russian imports of 'other coals' to the EU fell 11% to 7.23 million mt for volumes through to August. Imports from Russia in this category over September-December 2021 totaled 3.25 million mt.

EU iron and steel production weakened through 2022, reducing raw materials needs even though high EU energy prices encouraged coke ovens to keep running, or maintain higher rates to meet demand for off-gases and by products.

Costs to keep coke ovens warm during idling were high, while a fall in natural gas prices by year-end may reduce concerns.

Replacing anthracite coal with met coke byproducts and using more met coke to offset PCI rates may be a consideration, especially for operations at higher capacity utilization and as stockpiles of Russian met coals are worked down.

Global coal consumption could reach a new record high of more than 8 billion mt in 2023, and Germany will import about 43 million mt in steam coal, coking coal and coke products and no longer have the option to import Russia coals, German coal importers association VdKi's chairman Alexander Bethe said Jan. 13.

In a short time, coal users switched to alternative coals with new priorities around volumes from the US, South Africa and Colombia, the group said.

US Exports

US coking coal exports grew substantially to India over the first 11 months of 2022, more than doubling to 7.1 million mt from 2.78 million mt in the 2021 period.

That helped to make up for weaker US coking coal volumes to China, which fell to 2.34 million mt over the first 11 months, down from 10 million mt in the same period of 2021.

India's iron and steel output grew over the first 11 months of 2022, keeping demand up for raw materials including coking coal, PCI and iron ore pellets, in contrast to declining steel rates in major world markets such as the EU, North America, Japan and China.

US coking coal exports over January-November to Brazil rose 7.9% on the year to 4.9 million mt, and to Turkey more than doubled to 1.36 million mt.

Exports to Ukraine fell 80% to 383,611 mt, based on shipments recorded in January and February 2022, as the Russia-Ukraine conflict impacted shipments and demand at steel mills and coke operations affected by the war.

China's imports of US coking coal more than halved to 4.2 million mt over January-November year on year, while Russian coking coal imports doubled to 19.33 million mt. Imports from Russia classified as bituminous steam coal fell 18% to 24.9 million mt.

China's imports from Canada held up better, at 7.6 million mt of coking coal over January-November, down 5.6% on the same period of 2021.

China imported 21.6 million mt of coking coal from Mongolia over January-November, up 64%.